State Legalization of Recreational Marijuana: Selected ...

State Legalization of Recreational Marijuana: Selected Legal Issues

Todd Garvey Legislative Attorney Brian T. Yeh Legislative Attorney January 13, 2014

Congressional Research Service 7-5700

R43034

State Legalization of Recreational Marijuana: Selected Legal Issues

Summary

May a state authorize the use of marijuana for recreational purposes even if such use is forbidden by federal law? This novel and unresolved legal question has vexed judges, politicians, and legal scholars, and it has also generated considerable public debate among supporters and opponents of "legalizing" the recreational use of marijuana.

Under the federal Controlled Substances Act (CSA), the cultivation, distribution, and possession of marijuana are prohibited for any reason other than to engage in federally approved research. Yet 18 states and the District of Columbia currently exempt qualified users of medicinal marijuana from penalties imposed under state law. In addition, in November 2012, Colorado and Washington became the first states to legalize, regulate, and tax small amounts of marijuana for nonmedicinal (so-called "recreational") use by individuals over the age of 21. Thus, the current legal status of marijuana appears to be both contradictory and in a state of flux: as a matter of federal law, activities related to marijuana are generally prohibited and punishable by criminal penalties; whereas at the state level, certain marijuana usage is increasingly being permitted. Individuals and businesses engaging in marijuana-related activities that are authorized by state law nonetheless remain subject to federal criminal prosecution or other consequences under federal law.

The Colorado and Washington laws that legalize, regulate, and tax an activity the federal government expressly prohibits appear to be logically inconsistent with established federal policy toward marijuana, and are therefore potentially subject to a legal challenge under the constitutional doctrine of preemption. This doctrine generally prevents states from enacting laws that are inconsistent with federal law. Under the Supremacy Clause, state laws that conflict with federal law are generally preempted and therefore void and without effect. Yet Congress intended that the CSA would not displace all state laws associated with controlled substances, as it wanted to preserve a role for the states in regulating controlled substances. States thus remain free to pass laws relating to marijuana, or any other controlled substance, so long as they do not create a "positive conflict" with federal law, such that the two laws "cannot consistently stand together."

This report summarizes the Washington and Colorado marijuana legalization laws and evaluates whether, or the extent to which, they may be preempted by the CSA or by international agreements. It also describes and analyzes the U.S. Department of Justice's (DOJ's) response to these legalization initiatives as set forth in a memorandum sent to all federal prosecutors in late August 2013. The report then identifies certain noncriminal consequences that marijuana users may face under federal law. Finally, the report closes with a description of selected legislative proposals introduced in the 113th Congress relating to the treatment of marijuana under federal law, including H.R. 499 (Ending Federal Marijuana Prohibition Act of 2013); H.R. 501 (Marijuana Tax Equity Act of 2013); H.R. 689 (States' Medical Marijuana Patient Protection Act); H.R. 710 (Truth in Trials Act); H.R. 784 (States' Medical Marijuana Property Rights Protection Act); H.R. 964 (Respect States' and Citizens' Rights Act of 2013); H.R. 1523 (Respect State Marijuana Laws Act of 2013); H.R. 1635 (National Commission on Federal Marijuana Policy Act of 2013); and H.R. 2652 (Marijuana Businesses Access to Banking Act of 2013).

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State Legalization of Recreational Marijuana: Selected Legal Issues

Contents

Introduction...................................................................................................................................... 1 Washington Initiative 502 ................................................................................................................ 2 Colorado Amendment 64 ................................................................................................................. 4 Federal Law ..................................................................................................................................... 6 Federal Preemption of State Law..................................................................................................... 7

Preemption Under the Controlled Substances Act..................................................................... 8 Application of Obstacle Preemption Principles to Washington and Colorado

Legalization Measures.......................................................................................................... 11 Legalization....................................................................................................................... 12 Regulation and Licensing.................................................................................................. 14 Taxation ............................................................................................................................. 19

Are the Washington and Colorado Laws Preempted by International Law? ................................. 20 DOJ Responses to State Efforts to Allow Marijuana Use for Medicinal or Recreational

Purposes...................................................................................................................................... 23 Criminal Prosecutions ............................................................................................................. 23 The 2009 Ogden Memorandum ........................................................................................ 24 The 2011 Cole Memorandum............................................................................................ 24 The 2013 Cole Memorandum ........................................................................................... 24 Forfeiture ................................................................................................................................. 26 Civil Lawsuit ........................................................................................................................... 27

Additional Legal Consequences of Marijuana Use ....................................................................... 28 Congressional Response ................................................................................................................ 30

Contacts

Author Contact Information........................................................................................................... 32

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State Legalization of Recreational Marijuana: Selected Legal Issues

Introduction

Supreme Court Justice Louis Brandeis famously praised the division of sovereign powers included within America's constitutional structure for its capacity to encourage states to "serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country."1 This legislative freedom is constrained, however, by various constitutional restrictions including the Supremacy Clause, which provides that federal law "shall be the supreme Law of the Land."2 Pursuant to this established principle of federal legal preeminence, any state law that conflicts with federal law is generally considered preempted and therefore void. Although simple in theory, the task of determining whether a state law is "in conflict" with federal law can be incredibly complex in practice.

The ongoing national debate over marijuana provides a clear example of the confusion associated with the states' ability to pursue policies that deviate from those advanced by the federal government. In addition to the 20 states and the District of Columbia that currently exempt qualified users of medicinal marijuana3 from penalties imposed under state law, Colorado and Washington in late 2012 became the first states to legalize,4 regulate, and tax small amounts of marijuana for personal (i.e., nonmedicinal) use by individuals over the age of 21.5 These broad legalization initiatives stand in stark contrast to federal law, which makes the cultivation, distribution, or possession of any amount of marijuana--for any purpose other than bona fide, federally approved scientific research--a criminal offense.6

Therefore, the possession, cultivation, or distribution of marijuana remains a federal crime within Colorado, Washington, and every other state. As a result, individuals who grow, possess, use, sell, transport, or distribute marijuana, even when done in a manner consistent with state law or pursuant to a state-issued license, are nonetheless in violation of the federal Controlled Substances Act (CSA) and remain subject to federal criminal prosecution or other consequences under federal law.7 Given the federal government's continued ability to enforce its own prohibition, it cannot be said that the Washington and Colorado laws create a right to use

1 New State Ice Co. v. Liebmann, 285 U. S. 262, 311 (1932) (Brandeis, J., dissenting). 2 U.S. CONST., Art. VI, cl. 2. 3 For a discussion of state medical marijuana laws, see CRS Report R42398, Medical Marijuana: The Supremacy Clause, Federalism, and the Interplay Between State and Federal Laws, by Todd Garvey. 4 It is important to distinguish between two common terms that have been used to describe state marijuana laws: legalization and decriminalization. For purposes of this report, a state "legalizes" conduct when an individual who engages in that conduct is not subject to any state penalty. A state decriminalizes conduct when criminal penalties are removed, but civil penalties remain. This report characterizes the Washington and Colorado laws as legalization initiatives because each state has removed all state-imposed penalties for qualified marijuana activities. The legalization initiatives are to be distinguished from state marijuana decriminalization measures, like that of Massachusetts, which remove criminal penalties for possession of small amounts of marijuana, but retain civil penalties. It is important to note, however, that the term legalization is itself misleading, as a state cannot fully "legalize" conduct that constitutes a crime under federal law. 5 Reports suggest that the number of jurisdictions that have legalized either medicinal or recreational marijuana will likely continue to grow. See, e.g., Tim Dickinson, The Next Seven States To Legalize Pot, ROLLING STONE, December 18, 2012. 6 21 U.S.C. ?841(b); 21 U.S.C. ?844(b). 7 For a discussion of how federal law enforcement may be affected by state-level positions on marijuana, see CRS Report R43164, State Marijuana Legalization Initiatives: Implications for Federal Law Enforcement, by Lisa N. Sacco and Kristin Finklea.

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State Legalization of Recreational Marijuana: Selected Legal Issues

marijuana. Nor does compliance with state law provide a defense to a prosecution brought under federal law.8

Nevertheless, President Obama expressed to Barbara Walters on ABC's Nightline program in a December 2012 television interview that in the hierarchy of federal drug enforcement priorities, his Administration has "bigger fish to fry" than arresting recreational marijuana users in jurisdictions where such use is authorized by state law.9 His personal views on this topic were later reflected in an August 2013 memorandum authored by the Deputy Attorney General, which instructed all federal prosecutors to use their "limited investigative and prosecutorial resources" toward certain specified marijuana-related criminal activities that the Obama Administration wants most to prevent, such as the distribution of marijuana to minors, the growing of marijuana on public lands, and the flow of revenue from marijuana sales to criminal enterprises, gangs, and cartels.10 The memorandum implied that the federal government's drug enforcement priorities would likely not include prosecuting individuals or organizations engaged in marijuana activities that are conducted in clear compliance with state laws that permit and regulate them. The memorandum noted, however, that "Congress has determined that marijuana is a dangerous drug" that remains illegal under federal law. The memorandum is an example of the doctrine of prosecutorial discretion, which gives the U.S. Department of Justice (DOJ) great leeway in choosing whether, and to what extent, to bring criminal prosecutions for violations of the Controlled Substances Act. However, a new Administration in the White House could easily change this federal approach toward marijuana.

Washington Initiative 502

Approved by a majority of Washington voters in November 2012, Washington Initiative 502 legalizes marijuana possession by amending state law to provide that the possession of small amounts of marijuana "is not a violation of this section, this chapter, or any other provision of Washington law."11 Under the Initiative, individuals over the age of 21 may possess up to one ounce of dried marijuana, 16 ounces of marijuana infused product in solid form, or 72 ounces of marijuana infused product in liquid form.12 However, marijuana must be used in private, as it is unlawful to "open a package containing marijuana ... or consume marijuana ... in view of the general public."13

In addition to legalizing possession, the Initiative provides that the "possession, delivery, distribution, and sale" by a validly licensed producer, processor, or retailer, in accordance with the

8 See, e.g., United States v. Stacy, 734 F. Supp. 2d 1074, 1079 (S.D. Cal. 2010) ("[T]he fact that an individual may not be prosecuted under [state] law does not provide him or her with immunity under federal law."); United States v. Rosenthal, 454 F.3d 943 (9th Cir. 2006) (holding that state medical marijuana law could not act as a shield to federal prosecution). 9 Devin Dwyer, Marijuana Not a High Obama Priority, ABC Nightline, December 14, 2012, available at 17946783#.UVmtVVE4gpV. 10 Memorandum for U.S. Attorneys from James M. Cole, Deputy Attorney General, Guidance Regarding Marijuana Enforcement, August 29, 2013, available at . 11 Washington Initiative 502 at ?20, amending RCW 69.50.4013 and 2003 c 53 s 334, available at _assets/elections/initiatives/i502.pdf. 12 Id. at ?15. 13 Id. at ?21.

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State Legalization of Recreational Marijuana: Selected Legal Issues

newly established regulatory scheme administered by the state Liquor Control Board (LCB), "shall not be a criminal or civil offense under Washington state law."14 The Initiative establishes a three-tiered production, processing, and retail licensing system that permits the state to retain regulatory control over the commercial life cycle of marijuana. Qualified individuals must obtain a producer's license to grow or cultivate marijuana, a processor's license to process, package, and label the drug, or a retail license to sell marijuana to the general public.15 The Initiative establishes various restrictions and requirements for obtaining the proper license and directs the state LCB to adopt procedures for the issuance of such licenses. On October 16, 2013,16 the LCB adopted detailed rules for implementing Initiative 502. These rules describe the marijuana license qualifications and application process, application fees, marijuana packaging and labeling restrictions, recordkeeping and security requirements for marijuana facilities, and reasonable time, place, and manner advertising restrictions.17

According to the adopted rules, Washington will impose an excise tax of 25% of the selling price on each marijuana sale within the established distribution system.18 The state excise tax will, therefore, be imposed on three separate transactions: the sale of marijuana from producer to processor, from processor to retailer, and from retailer to consumer. All collected taxes are deposited into the Dedicated Marijuana Fund and distributed, mostly to social and health services, as outlined in the Initiative.19

The Initiative also specifically provides that operation of a motor vehicle while under the influence of marijuana remains a crime.20

As of the date of this report, recreational marijuana retail stores have yet to open in Washington,21 although the LCB has received well over 3,000 applications to grow, process, or sell marijuana.22 The LCB has estimated that the application review process may take approximately 90 days to complete and that the state may begin issuing licenses by the end of February 2014.23

14 Id. at ?4. 15 Id. 16 Joel Millman, Washington State Sets Pot-Sales Rules, WALL ST. JOURNAL, October 16, 2013. 17 Washington State Liquor Control Board, Marijuana Licenses, Application Process, Requirements, and Reporting, at . 18 Id. at 20-21. 19 Washington Initiative 502 at ?26. 20 Id. ?31. 21 Steve Elliot, Toke Signals: Washington Waits While Colorado Buys, SEATTLE WEEKLY, December 30, 2013. 22 See Bob Young, In Washington, Pot Business Applications Surpass 3,000, SEATTLE TIMES, December 24, 2013 (noting that "[s]tate investigators plan to evaluate growing licenses first, so crops can be started as soon as possible in hopes of supplying retail stores by May [2014]".). 23 Jake Ellison, Where Legal Marijuana Stands on the Brink of the New Year, SEATTLE POST INTELLIGENCER, December 30, 2013, at ; see also Jack Healy, Up Early and in Line for a Marijuana Milestone in Colorado, N.Y. TIMES, January 1, 2014 ("While Colorado has incorporated the existing medical marijuana system, Washington is starting from scratch, with all production and sale of legal recreational marijuana linked to a new system of licenses, which will not be issued until late February or early March.").

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State Legalization of Recreational Marijuana: Selected Legal Issues

Colorado Amendment 64

Unlike the relatively specific Initiative 502, Colorado Amendment 64 provides only a general framework for the legalization, regulation, and taxation of marijuana in Colorado--leaving regulatory implementation to the Colorado Department of Revenue.

In November 2012, Colorado voters approved an amendment to the Colorado Constitution to ensure that it "shall not be an offense under Colorado law or the law of any locality within Colorado" for an individual 21 years of age or older to possess, use, display, purchase, consume, or transport one ounce of marijuana; or possess, grow, process, or transport up to six marijuana plants.24 Unlike Initiative 502, which permits only state-licensed facilities to grow marijuana, Amendment 64 allows any individual over the age of 21 to grow small amounts of marijuana (up to six plants) for personal use.25 Marijuana may not, however, be consumed "openly and publicly or in a manner that endangers others."26

In addition, the amendment also provides that it shall not be unlawful for a marijuana-related facility to purchase, manufacture, cultivate, process, transport, or sell larger quantities of marijuana so long as the facility obtains a current and valid state-issued license.27 However, the amendment expressly permits local governments within Colorado to regulate or prohibit the operation of such facilities.28 By comparison, Washington's Initiative 502 does not expressly allow Washington cities to ban marijuana stores from opening within their borders, and there is uncertainty about the degree to which such local prohibitions or moratoriums on the operation of recreational marijuana businesses may be enforced.29

Amendment 64 appears to envision a three-tier distribution and regulatory system, similar to that established in Washington, involving the licensing of marijuana cultivation facilities, marijuana product manufacturing facilities, and retail marijuana stores.30 In December 2012, Governor John Hickenlooper established the Amendment 64 Implementation Task Force (Task Force) to "identify the legal, policy and procedural issues that need to be resolved, and to offer suggestions and proposals ... that need to be taken" to effectively implement Amendment 64.31 The Task Force issued a final report on March 13, 2013, consisting of 58 recommendations. Of those

24 Colorado Amendment 64, Amending Colo. Const. Art. XVIII ?16(3), available at Satellite?blobcol=urldata&blobheader=application/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere= 1251834064719&ssbinary=true. 25 Id. 26 Id. 27 Id. at ?16(4). 28 Id. at ?16(5)(f). See also Dan Frosch, Colorado Localities Make Own Rules Before Final Decision on Marijuana Sales, N.Y. TIMES, June 12, 2013; John Ingold, Colorado Marijuana Stores Likely to be Concentrated in Few Cities, THE DENVER POST, July 25, 2013. 29 See Jake Ellison, City/County Bans, Moratoriums, and Zoning Approvals for Marijuana Businesses in Washington, SEATTLE POST INTELLIGENCER, December 12, 2013, at ; Gene Johnson, No Welcome Yet for Pot Shops in Many Wash. Cities, SEATTLE POST INTELLIGENCER, January 1, 2014. 30 The licensing and regulatory systems envisioned by both Colorado and Washington are modeled on similar state alcohol distribution schemes found across the country. 31 Task Force Report on the Implementation of Amendment 64, March 13, 2013 at 9, available at .

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State Legalization of Recreational Marijuana: Selected Legal Issues

recommendations, the most significant include establishing a "vertical integration" model in which "cultivation, processing and manufacturing, and retail sales must be a common enterprise under common ownership";32 imposing the required 15% excise tax while preserving the option for a future marijuana sales tax;33 restricting commercial licenses to grow, process, or sell marijuana to state residents only;34 and permitting both residents and nonresidents to purchase marijuana, but imposing more restrictive limits on the quantity of marijuana that may be purchased by out-of-state consumers (a quarter ounce versus an ounce for individuals with a Colorado state-issued identification card).35

To implement Amendment 64, the Colorado General Assembly passed three bills that were signed into law by Governor Hickenlooper on May 28, 2013.36 On September 9, 2013, the Colorado Department of Revenue and State Licensing Authority adopted regulations to implement licensing qualifications and procedures for retail marijuana facilities.37 The regulations establish procedures for the issuance, renewal, suspension, and revocation of licenses; provide a schedule of licensing and renewal fees; and specify requirements for licensees to follow regarding physical security, video surveillance, labeling, health and safety precautions, and product advertising.38

On November 5, 2013, Colorado voters approved a 25% tax on retail marijuana (a 15% excise tax that would raise revenues to be used for public school capital construction, and an additional 10% sales tax that would generate revenues to fund the enforcement of the retail marijuana regulations).39 On December 23, 2013, the Colorado Marijuana Enforcement Division issued its first recreational marijuana licenses to 348 businesses (136 retail stores, 31 product companies, 178 growing facilities, and 3 testing laboratories).40 While these businesses have been granted state approval to produce and sell marijuana, they may also have to gain the licensing approval from local governments prior to their operation.41 On January 1, 2014, 40 licensed retail marijuana stores opened their doors to sell marijuana to anyone 21 years of age or over.42

32 Id. at 16-19. 33 Id. at 28-31. 34 Id. at 33. 35 Id. at 49-51. 36 See Colorado Dep't of Revenue, Permanent Rules Related to the Colorado Retail Marijuana Code, September 9, 2013, available at blobheadername2=Content-Type&blobheadervalue1= inline%3B+filename%3D%22Retail+Marijuana+Rules%2C+Adopted+090913%2C+Effective+101513.pdf%22& blobheadervalue2=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251888487553&ssbinary= true. 37 Id. 38 Id. 39 Colorado Legislative Council Staff, Fiscal Impact Statement: Proposition AA, Retail Marijuana Taxes, September 24, 2013, available at b74b3fc5d676cdc987257ad8005bce6a/e3e37fa33a36873887257b6c0077ac93/ $FILE/Retail%20Marijuana%20Taxes_FN.pdf. 40 John Ingold, Colorado Issues First Licenses for Recreational Marijuana Businesses, DENVER POST, December 23, 2013. 41 Id. 42 Jack Healy, Up Early and in Line for a Marijuana Milestone in Colorado, N.Y. TIMES, January 1, 2014.

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